Found the dream home abroad? Six perils to avoid when buying a place in the sun

After months of searching, you have finally found it - your dream home in the sun. But before you get too excited about moving in, there’s the hard work of sorting out the mortgage and filling in all the paperwork.

Cut corners and it could leave you hundreds of thousands of pounds out of pocket. This is the situation that thousands of Britons have found themselves in after buying homes in Spain without properly checking their contracts.

Here are overseas property expert Simon Conn's six pitfalls to avoid when buying a home abroad.

Dangers: Buyers who do not properly check their contracts when buying abroad are at risk of being left hundreds of thousands of pounds out of pocket

1. A HOME THAT’S BEEN BUILT LEGALLY

Planning laws in many countries are not as robust as in the UK, so you need to ask proper questions about where the property you want to buy has been built.

Is it in an area that should have been set aside for green belt or agricultural land? If so, then there is a risk your dream home is unlawful. Make sure you take advice from an independent, English-speaking lawyer, who is preferably not from the same area as the property.

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HOW THIS IS MONEY CAN HELP

In many countries planning can be a minefield and you’ll need a permit to prove that the property you’re buying is legitimate. Permits may have been granted as a result of corruption or there may not be a permit at all.

An independent lawyer can hopefully save you the heartache of seeing your newly purchased property demolished.

Your lawyer should check the paperwork to confirm that all parts of the property have been built under the correct legislation. Local rules differ from regional laws, so checks should extend further than the area where the property is being, or has been, built.

THE BOOM IN AUCTIONS

Record numbers of people are using property auctions to bag a buy-to-let property.

Get into a bidding war and you could pay far more than you would have wish, but if you keep your wits, you could pick up a bargain.

Many people associate property auctions with derelict buildings, but properties are put up for auction for various reasons, such as sellers who want to avoid estate agency fees.

Auctioneer fees tend to be no more than 2 per cent plus VAT. Many sellers agree a reserve price with the auctioneer.

You can view properties ahead of the auction at open days. Then you just make your bid and, when the hammer falls, the deal is done.

The winning bidder must pay a deposit to confirm the purchase. At Auction House London, for example, buyers pay a 10 per cent deposit, with the balance required within 28 days.

Bidders can pay by cash or get a loan from a bank, building society or bridging lender. Most banks will provide mortgages, though it’s worth consulting a mortgage broker first.

Have a mortgage or loan agreed before the auction and an application in process, or you risk losing your deposit.

3. HOMES WITHOUT ELECTRICITY

If you think bureaucracy in the UK is bad, wait until you see what it’s like in other countries.

So even if you’ve got planning permission, and the property is built in a good area, have you actually got the right licences?

Not having the correct licences (such as ‘habitation’ in Spain) could have an impact on what utilities you can obtain. There have been lots of cases where new villas have been barred from connected to gas, water and electricity by the local council.

Watch out if you are buying a property in an apartment block or within a large development, as sometimes the developers will not register your property for the correct licences until all the properties have been registered in each purchaser’s name.

Be sure to establish exactly when licences will be issued, as this can take months.

4. DODGY BUILDING MATERIALS

Poor construction is a common problem. When you buy, always obtain an independent valuation, ideally from a professional surveyor in that country.

It doesn’t matter if the property is new or old, this will highlight any problems. New properties can sometimes be built on poor soil and with insufficient foundations, substandard building materials, or in dubious locations such as flood plains.

If you are buying a new property, be sure to check the developer’s building record and look into re-sales on the existing development to see how they have weathered. Be wary of the hard sell. Anything that seems too good to be true probably is.

5. BADLY WORDED CONTRACTS

One of the most important warnings when purchasing abroad is on contracts. It is common to receive only one contract in the local language, in which case, you must get a professional translation. Don’t rely on one given to you by the seller.

If you are given two copies of a contract which include the original and a supposedly accurate translation, get the English one checked by a professional and do not cut corners by getting a cheap translation.

It is not unknown for buyers to be given a translation which bears no resemblance to the original. Check that the translation does not contain any errors, omissions or additions, or you could be unwittingly agreeing to extra conditions or charges not covered under the original contract.

One simple check is to see that any translation you are given has the same number of paragraphs as the original. If not, then there is almost certainly a problem.

6. CLAUSES THAT'LL COST YOU DEAR

There can be some odd catches in overseas property contracts. In some countries, conditions are set at the time you sign a sales contract, which mean you must either pay certain amounts of money at set times, or complete the transaction within a defined period.

Time constraints may be set due to national laws, rather than a developer’s or agent’s timeframe. Some of the conditions set are unreasonable and do not take into account delays which may be beyond your control.

For example, if the property is still being built, there may be construction delays.

Or if you are applying for a mortgage to purchase the property, you may encounter financial trouble or difficulties getting a valuation.

Before parting with any cash, ask your independent lawyer to check the contract for clauses that become applicable if you decide to withdraw from the purchase.

Ask for a cooling-off period of at least 14 days. This will give you plenty of time to return to your home country and seek other professional advice before proceeding any further.

INVESTMENT CLUB THAT COULD HELP ASPIRING LANDLORDS

Aspiring landlords struggling to build up a deposit can now use crowdfunding.

This is where individuals lend their cash to a start-up business in the hope that it thrives and pays them interest in return.

One firm, Crowdlords, allows house buyers to ask investors to help them raise the cash to buy a property.

Quite often this is a renovation project where the owner refurbishes a property quickly, then resells it. Those who contributed all get a share of the resale price.

With buy-to-let projects, the rental income is divided between the investors. Typically there will be an agreed period - say five years - after which the property is resold and all who contributed to its purchase share in the capital growth. It’s a new concept and Crowdlords currently has only five live listings.

Current projects include a two-bedroom house in Teesside that 33 investors contributed a total of £60,000 to buy. The owner intends to renovate the house, rent it for a short time and resell it within a year. It is expected to make 16 per cent.

The buyers pay £500 to Crowdlords for listing the property. The site then takes 5 per cent of the amount raised, and a 10 per cent share when the property is sold.

Risks include a landlord not being able to find a tenant or having extended void periods, or being unable to sell a property.

Due to regulations, only high net worth individuals and experienced investors can contribute to these projects.